Asian equities experienced significant strength, with Hong Kong and Mainland China demonstrating notable outperformance in the region. Japan, the Philippines, and Thailand also had positive trading sessions; however, South Korea’s performance lagged behind the wider trend. These developments occurred in the context of multiple macroeconomic tailwinds benefiting the market. The release of the Caixin Services PMI for October, which rose to 53 from the previous month’s 50.3, was seen as particularly encouraging, as it surpassed economist forecasts and indicated robust month-over-month improvement. This positive signal from the services sector, based on a trusted S&P Dow Jones survey, furthered the constructive sentiment in equity markets.
Additionally, the Citi China Economic Surprise Index showing a rebound into positive territory since the initiation of stimulus measures in late September reinforced investor confidence. Premier Li’s keynote speech at the China International Import Expo, where he highlighted ample space for fiscal and monetary policies, also drew attention. His remarks about foreign investment and a target GDP growth of around 5% for 2024 indicated a commitment to nurturing economic growth. This is particularly significant considering Premier Li’s pro-business stance and experience prior as Shanghai’s Secretary, suggesting continuity in economically liberal policies.
In a notable celebration of market innovation, the sixth anniversary of the Shanghai Stock Exchange’s STAR Board coincided with a remarkable +4.35% rise. Increased capital flows from Mainland investors into Hong Kong equities were evident, with net buying reaching $1.21 billion through the Southbound Stock Connect, representing nearly 50% of Hong Kong trading by value. The day registered considerable market confidence, with all sectors displaying positive performance, primarily led by growth-oriented stocks such as insurance, diversified finance, and brokers, following positive earnings reports, notably from China Life.
Yum China’s reported third-quarter results triggered a rise of +6.99% in its Hong Kong share class, while Kuaishou’s ambitious plan to enter the Brazilian e-commerce market drove a jumping gain of +10.68%. The discourse surrounding Apple’s potential new product offering akin to Meta’s Ray-Ban glasses buoyed stocks of Apple suppliers. Notably, while global attention remained fixated on the upcoming U.S. Presidential election, the increasingly positive trajectory of the Chinese economy and stock market began to draw some investor interest as they performed well amidst the political uncertainty.
In the Hong Kong market, the Hang Seng Index and Hang Seng Tech Index rose by +2.14% and +3.57%, respectively, buoyed by trading volumes significantly higher than average, indicating robust investor engagement. The positive breadth of the market was reflected in the advancing stocks, which numbered 442 against 62 that declined. A notable increase in short turnover also occurred, predominantly in growth and small-cap sectors, whereas large-cap and value stocks witnessed comparatively lower gains. All sectors were uplifted, particularly consumer staples, technology, and real estate, as various sub-sectors including diversified financials and semiconductors exhibited robust performance.
The performance across Mainland markets was similarly positive, with the Shanghai, Shenzhen, and STAR Boards posting gains. Growth and small-cap stocks easily outperformed their larger counterparts, reflecting a broader market enthusiasm for risk assets. The favorable performance spanned across sectors, notably real estate and technology, which illustrated the market’s resilient recovery. As trading volumes surged, Northbound Stock Connect activity also increased, indicating strong cross-border investment interest. Moreover, the Chinese Yuan and regional currency indices gained traction against the US dollar, accompanied by rallying treasury bonds, and rising commodity prices in copper and steel signifying growing demand and heightened economic momentum.
Overall, the discernible recovery of Asian equities, particularly in Hong Kong and Mainland China, reflects a complex interplay of macroeconomic indicators, corporate earnings surprises, investor sentiment, and intra-regional capital flows, guided by policy stability under Premier Li’s leadership. Market watchers are advised to remain attentive to these developments, especially given the potential market dynamics that could arise post-U.S. elections. As the momentum builds, investors are encouraged to consider the underlying factors supporting the recovery narrative in China’s equity markets.
